Redundancy survival guide
Being made redundant can be a difficult time in your
life. It's important to consider your options to make the most
of your situation.
Here we explain what a redundancy is and some things you can do
to get back on track following a redundancy.
What is a
A redundancy is when your employer terminates your employment
because they either decide that your job is no longer needed, or
they become insolvent or bankrupt. You will usually receive a
redundancy payment, which will have rate of tax applied that's
lower than your marginal tax rate.
Payments included in a redundancy package
A redundancy package will include a redundancy or severance
payment and your unused annual leave and long service leave. It may
also include a payment in lieu of notice and a 'golden handshake'
or other incentive payment.
Accrued sick leave or personal leave is not usually paid out to
you when you leave an organisation.
If your employer has gone into administration or liquidation and
you are owed entitlements after losing your job, you may be
able to get financial help from the Australian Government through
the Fair Entitlements
How your redundancy payment will be taxed?
A genuine redundancy, which consists of a payment in lieu of
notice and a possible incentive payment, has a special tax
treatment which means some or all of your payment will be paid to
you tax free.
The tax free portion is calculated as:
base amount + (service amount x completed years of
For the 2017-18 financial year, the base amount is $10,155 and
service amount is $5,078. Any amounts over the tax-free portion are
taxed concessionally, up to ETP cap amounts, at a maximum of 32%
(including Medicare levy) if you are below preservation age, or 17% (including
Medicare levy) if you have reached preservation age.
Amounts over the tax-free portion are taxed as employer termination
payments (ETPs). If you are aged 65 or over you are not
eligible for a 'genuine redundancy' payment and your entire payout
will be treated as an ETP.
Unused annual leave and long service leave is also taxed
concessionally, up to 32% (including Medicare levy). For more
information see the Australian Taxation Office's redundancy payments webpage.
Making a redundancy
Unless you are retiring, your payout will have to last you until
you get another job, and this may take longer than you think.
Work out how long your payout will last so you can better plan
your next steps.
Prepare an emergency budget
List all your essential costs such as rent or mortgage payments,
utilities, food, transport, insurances and other necessary
expenses. It may be helpful to create a temporary budget, just to
get you through this period.
Work out where your money is going.
Once you've added up your basic living costs you'll be able to
calculate how long your payout can last while you're looking for
Paying your bills
Trying to manage bills without a regular income can be
If you're having trouble paying your water, phone, gas or
electricity bills, contact your utility providers and see if you
can negotiate a better repayment arrangement. For more details see
our webpage on problems paying your
If you're struggling to pay your loans and credit cards,
talk with your credit or service provider and let them know you are
experiencing financial difficulty and ask for a hardship variation from your
credit provider. Taking action straight away can stop a
prevent a small problem from becoming a big one.
For more tips on living on a tight budget, see our
Managing a large payout
If you have received a large payout, you could:
Then you can draw the money down slowly to cover your ongoing
Paying down debt is a great idea when you have a new job to go
to but, before you go down that path, find out what waiting periods
(if any) will apply before you can access unemployment benefits.
Make sure you can cover your expenses for this period before making
extra repayments on your debts.
Being cautious at the beginning may save you from experiencing
financial hardship in the future if finding a new job turns out to
be harder than you hoped.
Don't forget your super
Any break from work can affect your super balance at retirement.
Now might be a good time to check your super, consider your
investment option and insurance needs and think about how you can
top up your super balance when you start working again.
Work out how a break from paid work will affect your retirement
If you've been made redundant you may be entitled to
A redundancy payout is based on a number of weeks or months of
your ordinary time earnings. You will also have received an amount
of money for your unused annual leave. You will not be eligible for
Centrelink benefits for the period of time you have been paid
For example, if you receive a payout equal to 8 weeks pay plus 3
weeks for unused annual leave, you will not be eligible for
Centrelink payments for at least 11 weeks. This is known as an
'income maintenance period'.
You may also have to serve a 'liquid assets waiting period'
based on the amount of liquid assets you have, that is, assets that
could be used as income.
If you are experiencing financial hardship due to unavoidable or
reasonable expenditure, these waiting periods may be waived. You
can lodge a claim for payment through the Department of Human Services. They will
assess your claim and advise you of any waiting periods that apply.
Your partner's income
If you have a partner, their income will be taken into account
when working out your entitlement to income support payments.
If your partner has a high income you may not be eligible for
income support benefits. For more information see the Department of
income test for allowances.
Long service leave for building and construction workers
Building and construction workers often work on multiple
projects across many employers, which makes it difficult to accrue
long service leave (LSL). Each state and territory has a LSL scheme
that gives building and construction workers access to portable
Some of these schemes also cover a small number of other
industries such as:
- Contract cleaners
- Community sector workers
- Security workers.
If you have been made redundant from one of these industries,
contact the scheme in your state to see if you are entitled to a
LSL payment. You can access the schemes through the Ausleave website.
Being made redundant may give you an opportunity to complete a
short course or pursue a new qualification. This may help you get a
If you are entitled to Centrelink benefits you may be able to
get help with the cost of retraining. See the redundancy webpage on the Department of
Human Services website
Returning to work after
Finding a new job may be a relief after you've been made
redundant. Your next steps will depend on the state of your
finances when you start your new job.
First sort your bills
If the bills have mounted up while you were unemployed, your
first priority will be getting back on your feet. Start with the
most urgent bills, making sure you leave yourself enough money to
cover ongoing living expenses. Be disciplined with your cash until
you're up to date with all your bills.
Money left over
If you are fortunate enough to still have some of your payout
left when you start a new job, think carefully about the
opportunities this gives you.
Here are a few ideas to help you make the most of your left over
- Reduce debt - If you have any personal debt
such as a credit
card or loan, consider paying it off or reducing it to
free up income for savings.
- Create an emergency savings account - A
savings buffer can help you deal with unexpected expenses in the
future. For more information visit our webpage on building an emergency
- Start an investment portfolio - Learn
how to build your investment plan using the tools and
resources in the 'invest smarter' section of the
- Take a break - Being out of work and searching
for jobs can be extremely stressful, so if you can afford it, take
a short break before you start your new job to recharge your
Being made redundant can be an emotional and
difficult time. It's important to keep a level head and plan as
much as possible so that you make the best of what you have. Try to
keep a positive attitude as this will show through in job
interviews and seek help if you need it.
Last updated: 30 Apr 2018